Competitive advantage Essay Example | Topics and Well Written Essays - 3000 words

Competitive advantage - Essay Example This is a trend that is popular mostly with retailers who wish to control both ends of their business. This is where the retailer wishes to manufacture or provide what they sell and manage part if not the whole distribution channel. This increases the business’ level of integration. However, not all organizations choose to further this strategy because of various reasons. This paper will look into the reasons why organizations integrate vertically whereas others do not. Vertical integration is categorized into two; forward and backward integration. In case of forwarding integration (also referred to as downstream integration), the organization expands its activities to manage distribution processes e.g. using its own trucks and personnel. For backward or upstream integration, the organization expands its operations to include manufacturing or production of raw materials e.g. owning a farm to produce crops used as raw materials (Antonelli 2009). The following is a diagrammatica l representation of Vertical Integration. As stated earlier those firms that adopt vertical integration do so with the aim of achieving some level of control over their inputs and outputs within their supply chain. This results in the firm in question being able to manage the production of its raw materials and the finished goods. This increases the visibility of all levels of production thereby asserting organizational control. Many companies have adopted it as a result of the various economic and competitive benefits it offers (Murray, Poole and Jones 2006). When an organization takes on more assets e.g. farmland which happens to be close to the processing plant then the cost of transporting raw materials is lower. Therefore, where vertical integration results in closer proximity or interdependent facilities or locations the costs are significantly lowered.